The MPs’ debate yesterday was a small affair, with very few Tory MPs as the prime minister was addressing the 1922 Committee at the same time. It was called by Barry Gardiner, Labour MP for Brent North who was passionately in support of reforming leasehold in the 1990s which led to the 2002 Act.
Parliament TV: https://parliamentlive.tv/Event/Index/0488060e-de0c-46ac-abb4-247297850602
Hansard https://hansard.parliament.uk/commons/2023-02-28/debates/F4CC1C3D-12F4-47DD-8F0F-730993CD4576/LeaseholdersAndManagingAgents
Although LKP has met Mr Gardiner on occasions during the last 10 years, his promotion to the front bench under Jeremy Corbyn kept him busy, although occasionally he would make salty contributions to leasehold debates – usually accompanied by naming operators he found fault with.
On this occasion, Mr Gardiner decried the unfairness of marriage value and named a string of freeholders and managing agents in detailed examples in his constituency, including Freshwater, ABC Estates (prop: Richard Davidoff, who was not named), FirstPort (“fraudulent” etc) and others.
Mr Gardiner also paid tribute to leaseholder activists of the 1990s, including Charlotte Martin and the late Nigel Wilkins, a former employee of the FSA.
Although Mr Gardiner was applauded by MPs on all sides, neither he nor housing shadow Matthew Pennycook secured any undertaking from new housing minister Lee Rowley that the government would include leasehold reform in the autumn King’s Speech.
It was a huge disappointment that it failed to make the last Queen’s Speech in April last year, apparently falling foul of Boris Johnson’s Number 10 – to the disappointment of, among others, housing ministers who resorted to Twitter to protest their enthusiasm for reform.
Mr Gardiner began by attacking the entirely made-up notion of “marriage value”: that a lease and a freehold are worth more when owned together rather than when valued separately.
“To see the injustice of marriage value, one need only to consider the price difference on the open market between a leasehold flat with a 125-year lease and the same flat with a share of freehold,” said Mr Gardiner. “The difference is nil, yet the first is on a yo-yo tender, whereby an owner, such as the Duke of Westminster, sells for the full market value, only to receive the entire property back at the end of the lease, allowing him to sell it all over again.”
Sir Peter Bottomley intervened to remind MPs that as well as “traditional landlords”, the charity the Wellcome Trust, which owns the old aristocratic Henry Smith estate of 58 acres around Onslow Square in Kensington, did not hesitate to run off to the Upper Tribunal to establish highly favourable terms for lease extensions on its portfolio – “that decision should have been made by Parliament, not highly expensive lawyers arguing in court”.
Mr Gardiner replied: “When the Government come to legislate for leasehold reform — they have promised to do so and I look forward to that — I trust that they will understand that it is that fundamental injustice that has kept leaseholders prisoner to the vagaries of their freeholder and, often, the outrageous services charges imposed by their managing agents.”
This prompted Mike Amesbury, Labour MP for Weaver Vale in the North West, to say: “Isn’t it time to abolish, rather than polish, the leasehold system?”
The North West has the highest concentration of leasehold properties outside London, many of them leasehold houses from the industrial era … as well as new ones with rapacious ground rents from plc housebuilders such as Taylor Wimpey, Redrow, Bloor, Persimon and Countryside Properties plc.
Tory MP for Ipswich Tom Hunt threw into the mix “gross” Railpen – the railway workers pension fund – which is refusing to accept government funding, that it would have to match, to remediate cladding sites.
This was echoed by Stephen McPartland, who has done much for leaseholders caught up in the cladding scandal, and whose Stevenage constituency has a site that Railpen will not remediate.
Further support came improbably from Jim Shannon, a Democratic Ulster Unionist MP for Strangford, who was also indignant at “no limit on the amount paid in service charges, insurance, ground rent and forfeiture charges, [that] have left leaseholders at the mercy of the unscrupulous curious”. Which was odd, as Ulster does not have any significant leasehold.
Mr Gardiner then got on with the business of naming names:
“Hallmark Premier Estates is the managing agent … but it is not providing a premier service — just as it is failing to do in Parkside Place, in Barham village, where the insurance premium, which was £22,738 in 2021, has risen 108% to £47,415.
“No wonder I was told yesterday that the landlord would be replacing Hallmark as the managing agents for “unspecified reasons”.”
At Lawns Court he said a constituent said the service charges for my one-bedroom flat have risen from £1,600 per annum to over £5,000 per annum.
“That is a 212% increase,” said Mr Gardiner. “The managing agents there are Aldermartin, Baines & Cuthbert [ABC Estates].”
“At the Living City development in Colindale in my constituency, leaseholders were advised in March last year that after the constant failure of the communal hot water supply to the building over three successive winters, they would receive a rebate on their service charge, only for that offer to be countermanded in October last year.
“Residents noted that their insurance cover appeared to be paying for associated commercial units, and found that the premium had been increased by 100%. Lift maintenance is also charged, conveniently, on a day rate rather than a job rate: the lift fails, and a day rate is charged to fix it. Strangely, it fails again the following day, and another day rate is charged to fix it again—and so on, day after day, until astronomical charges have been incurred, with the managing agents able to take a management fee every time, of course.
“I have written to all these managing agents, challenging them to justify their service charges and other fees, and to none have I been writing longer than Freshwater and its associated companies — at the last count more than 150 linked under the same beneficial ownership.
“It is because of Freshwater that in 1999 I launched my original campaign for what became the 2002 Act. One of its leaseholders wrote to me from Barons Court in my constituency, saying:
“Dear Barry, every double bed apartment now costs £6,000 up from £2,600 per year a 130% increase in service charge, and we had to pay for the Waking Watch. The management company will not tell us how much commission they receive from the insurance premiums. We arranged our own fire tests and paid for critical remediation work.”
Then Mr Gardiner turned to FirstPort “a name well known to many Members”.
“Since 2013, my constituents in Chamberlayne Walk have been challenging unreasonable service charges by FirstPort management services. I say unreasonable but, in fact, the word “fraudulent” is closer to the truth.
One constituent said he was charged £1,725.88 for internal and external decorations, which involved the painting of the windows. “My windows are UPVC – no redecoration was required,” said the leaseholder.
“FirstPort’s response to those and the more than 500 more complaints like them that I have received is to make no response and ignore things for as long as possible—for months and years, not days and weeks. There is a lack of accountability and transparency over what the residents are charged for and whether the costs are reasonably incurred and reasonable in amount.
“There is a total failure to provide leaseholders with a breakdown of service charges. Many of my constituents can wait more than 20 months for accounts to be finalised.
“Even when FirstPort admits that refunds are owed to the leaseholder because of double counting, overcharging or charging for services not provided, the requests for the return of the overpayments are often ignored, or the returns can take many months to be made.”
But “one brave, resilient resident” at Chamberlayne Walk has taken action against the service charges, with FirstPort arguing that “by paying up they had intimated consent; and, especially ironic given the FirstPort practice of delay, it tried to rely on the length of time the leaseholder had taken in bringing the challenge to the tribunal”.
But on Friday 13 January, the leaseholder reported that the landlord / FirstPort were settling the claim just before the hearing on Monday.
“Of course, FirstPort did not want that in the public domain, but it now is, and 200 other families have now been given heart that it is possible to take FirstPort on and beat it.
“Already, 42 other leaseholders on the estate have signed up to a class action. But the point is that this should not be happening … The problem is the whole imbalance of power between the leaseholder and the freeholder.”
Conservative MP Andy Carter, for Warrington South, paid tribute to the leasehold house owners at Steinbeck Grange, particularly Mike Carroll, who has mobilised them. But he criticised the Competition and Markets Authority for considering the site in its leasehold mis-selling investigation but dropping any action.
“Residents not only have to pay fees but run into difficulties when they try to approach the freeholder. They are faced with complicated, protracted processes, in which they cannot even get information about the leaseholds for their homes without having to spend money. If those constituents are trapped in leasehold, it makes selling those properties incredibly difficult. A number of solicitors have approached me in Warrington to say that they had been asked to act for people buying the properties and had advised them not to. Developers had then recommended solicitors who disappeared overnight, so that the process could go through. That strikes me as a real scandal.
“The Competition and Markets Authority looked at this situation for two years and did not really conclude anything. I say to the Minister that that was a missed opportunity for a deep dive into what is going on, not just with developers but with freeholders.”
Florence Eshalomi, the Labour MP for Vauxhall, raised the issue of the building safety scandal.
“Just yesterday, I held an online surgery with a group of leaseholders whose managing agent has raised their annual service charge from £1,000 a year to over £30,000 a year. When I saw the email come into my inbox, I replied straightaway, because I could not believe those figures. That staggering increase was justified by fire safety problems, but the agent will not even disclose the details of the defects to the leaseholders. I ask Members to pause for a second and think about what it would be like to receive such an email.”
Munira Wilson, LibDem MP for Twickenham, referred to “two different blocks of flats in Twickenham, in which managing agents have wrongly commissioned fire safety assessments for buildings under 18 metres”.
Stephen McPartland talked of his frustration over Railpen and Vista Tower in Stevenage.
“We have secured huge concessions from the Government, with over £10 billion in the Building Safety Act 2022 … What frustrates me is that, some years on, there are tenants still trapped in buildings such as Vista Tower in Stevenage, where the freeholder is Railpen. We know what is wrong with the building, and the Government have the money there to help to fix it. Why has it not been fixed? What is the delay? The building is there, and we know that — allegedly — it needs these works for it to be safe. The freeholder and the management agents need to work with the tenants to get the work done, but there are just delays. Leaseholders up and down the country are still trapped.”
Justin Madders, Labour MP for Ellesmere Port and Neston and co-chair of the APPG on leasehold and commonhold reform, referred to a site “where the insurance company for a block of flats just happened to operate from the same address as the managing agents and the freeholder. Under what other contract would someone be expected to pay all the costs but not actually be able to see the terms of the contract? Yet that is what we see with these insurance deals. Thankfully, that is being investigated by the Financial Conduct Authority. This may well provide us with yet another payment protection insurance-style scandal.”
And then he turned to “fleecehold” charges on private estates:
“I also think that estate management companies on new-build estates, whether they are leasehold or not, need to be tackled, because the opportunities to inflate charges exist there almost as much as they do in a block of flats. Much as with leasehold itself, I do not accept that these arrangements are needed at all. The fact that developers choose not to pay a sum to the local authority for the financial commitment that is needed to maintain communal areas, instead saving themselves money by passing on the charge to homeowners, is another example of the rapacious nature of many in this sector.”
Apsana Begum, Labour MP for Poplar and Limehouse, said: “In my constituency of Poplar and Limehouse, people view the Westferry Printworks debacle and the history of controversy as illustrating systemic priorities that lie in serving billionaires rather than the interests of local people. I appeal to the Government to put local people in need at the heart of their planning and housing agenda, and once and for all to end the scandal of leasehold for millions who have bought their home but do not feel like they own it.”
Winding up the debate for Labour, Matthew Pennycook, Labour MP for Greenwich and Woolwich and the shadow housing minister, asked why the government has done nothing to progress Lord Best’s recommendations on the regulation of managing agents.
“The Government’s failure to act on the recommendations has had very real consequences. The burdens that homeowners have long laboured under because of the dysfunction of the property agent market and the inherent flaws of the leasehold system have become more acute over recent years as a result of the building safety crisis and surging inflation, the combination of which has pushed many already hard-pressed leaseholders to the brink of financial ruin …
“Although we may wish ultimately to go further than the Government in important respects, Labour is committed to fundamentally reforming the leasehold system, and we will support in principle any legislation that comes forward to that end.”
Housing minister Lee Rowley replied that “while I cannot anticipate what will be in the package, we are committed to bringing forward those reforms. We have said that we want to undertake reform in this Parliament. There is still time to do that and my right hon. Friend the Secretary of State will provide more information in due course, when he is able to do so”.
Related posts:
Labour to cap ‘legalised extortion’ of ground rents and end leasehold houses … Opposition and government now compete to reform leasehold
Grenfell cladding debate: Who thinks offshore freeholders will pay (apart from government ministers)?
Civil service are fired up to reform leasehold, helped by the ‘personal commitment’ of the Secretary of State … Er
Commons leasehold debate. December 20 2016
Lords debate leasehold reform
MPs briefing: Stop trying to reform leasehold. Just bring it to an end, and join the rest of the world
Have only ever voted Conservative, but now as a retirement apartment leaseholder the way forward has to be vote Labour for Leasehold reform or Conservative to continue being Conned!
The Conservatives have become beholden to big business interests and donations – whether it is the scandal of leasehold, or private water companies dumping sewage in our rivers and seas. They used to support the consumer and genuine free markets, improving the buyer experience. No more, they have woken up too late in realising that they are likely to lose heavily at the next election. One can only hope Labour are not similarly compromised. Their performance in Wales and London leaves a lot to be desired, but they have said the right things re reform and abolition of long leasehold recently, let us hope it translates into action.
There are 4,860,000 Leaseholders in England & Wales according to recently published Government statistics, that is a lot of votes that are up for grabs, so far so good.
I believe that the vast majority of Leaseholders are absolutely sick to the back teeth with being systematically exploited by the continued use of an Archaic Feudal Freehold Law (Racket).
This has and will continue to result in more and more Leaseholders going Right to Manage, with or without Government support. It is only a matter of time until the current Freehold – Leasehold racket implodes on its self.
LKP report that about 5,000 Residential apartment blocks are RTM, (I stand to be corrected on this by LKP) that may not seem much, but that figure will increase, and any variation of more than -2.5% in income stream to any firm will hit the Freeholders hard, and that situation will only get much, much worse, from the Freeholders financial perspective
The word is out, this Industry is highly toxic, who in their right mind would buy a Leasehold property under the current regime, unless it was properly managed by an effective RTM Company and reputable Managing Agent, I for one would not.
My advice to any prospective purchaser of a Leasehold property is “RUN A Mile” unless it is managed by a RTM Company and reputable Managing Agent.
If you would like to see evidence of the aforementioned then simply research “Trustpilot” simply enter the name of the Management Agent of the property you are considering purchasing, and be prepared to be horrified by the real “Reviews” I kid you not.
And whilst you continue to research have a good look at the reputation of the firm that built you prospective new home, you may find that the builders reputation is also in the same gutter has your potentially inherited Managing Agent.
The above may seem to be harsh or unfounded comments, they are, to the best of my knowledge and belief factually correct.
Stephen
Its 9 years since I produced the number of RTM sites for the Competition and Market Authority as part of their report on property management at the time it got to six thousand and something sites. The numbers are up since then so its probably now closer to 8,000-9,000 sites.
While RTM continues to grow slowly for many sites the law does no work after legal cases on more complex sites..
As for Trustpilot I would not trust them either way. At one end of the scale some agents pay to limit complaints and put up false reviews, some in the middle are genuine, and at the other end of the scale some reviews are written by leaseholders who might politely be described as having questionable motives.
As a life long tory voter I will be voting Labour as they are the only ones promising leasehold reforms.
Whether they deliver we will just have to see.
My own managing agents don’t even bother to send the accounts out any more.
They’ve blown all the reserve fund built up over 20 years on crappy paint job so god help us if major renovations are needed.
What I find most surprising and concerning is not just the leasehold system, but also the failure of law enforcement and of many bodies and organisations involved. The FCA has failed for nearly two decades to address the scandal of extortionate commissions and other deplorable practices by insurers, brokers, property managing agents and landlords. The Financial Ombudsman Services, in the few cases it considered a leaseholder an eligible complainant, has always decided in favour of the regulated firm against the leaseholder, at the cost of disregarding centuries of insurance law. The last time a Local Authority prosecuted a Landlord for a breach of Section 21 or 22 of Landlord and Tenant Act 1985 was about 25 years ago. ARMA and RICS, with their codes of practice etc. have not stopped their members receiving the insurance commissions and premiums that the FCA, now pressed by the SoS Michael Gove MP, is starting to question and investigate. Breaches of Companies House rules also go without consequences (you might have read the oddities which are recorded on Companies House, such as a Director named “Adolph Tooth Fairy Hitler”): its service to complain about a limited liability company has tackled none of the issues affecting freeholders, RTM etc. as far as I know. You can of course forget any action by the Serious Fraud Office. And I have other bodies to add to the list. I have a simple question: WHY?